How your fee works
Your performance fee is calculated only on new investment performance above the applicable High Water Mark. Deposits and withdrawals are treated separately from investment performance.
Step by step
You invest money
Your opening investment becomes both your portfolio value and your starting High Water Mark. A fee can only ever apply to growth above what you put in.
The portfolio value changes
Your portfolio value moves up and down with the market. This on its own never triggers a fee — the fee is worked out at set points in time.
A High Water Mark is maintained
The mark records the level your fees have already been settled up to. It moves when you add or remove money, and when a fee is charged.
Below the mark, nothing is charged
While your portfolio is below the applicable High Water Mark, the performance fee is nil. A fall has to be recovered before fees resume.
Above the mark, 20% of the new gain is charged
Once your portfolio rises above the mark, 20% of that new performance is charged — and only that part, not the whole rise.
The mark resets to your post-fee value
Your new High Water Mark becomes your portfolio value after the fee has been taken. The same profit is therefore never charged twice.
Three promises this method makes
- Your deposits are not treated as profit. When you add money, your High Water Mark rises by exactly the same amount, so your own capital is never charged a performance fee.
- Your withdrawals are not treated as investment losses. Taking money out reduces your portfolio and your mark together — it does not manufacture a loss.
- The same investment profit is not charged twice. Once a fee has been charged on a gain, the mark moves up past it permanently.
Your portfolio value is not your High Water Mark
These two numbers are different things, and the difference is what decides your fee.
Here your account holds ₹3,20,000 but your fees were last settled at ₹3,40,000. The mark is a benchmark, not your balance. The performance fee is ₹0.
A worked example: recovering from a fall
This is the case clients ask about most — the portfolio rose ₹35,000, but only ₹20,000 of it is charged.
- Portfolio value at the start of the period: ₹3,25,000.00
- High Water Mark at the start of the period: ₹3,40,000.00
- Applicable High Water Mark at period end: ₹3,40,000.00
- Portfolio value at the end of the period: ₹3,60,000.00
- New performance above the High Water Mark: ₹3,60,000.00 - ₹3,40,000.00 = ₹20,000.00
- Performance fee: ₹20,000.00 x 20% = ₹4,000.00
- Portfolio value after the fee: ₹3,60,000.00 - ₹4,000.00 = ₹3,56,000.00
- Your new High Water Mark is ₹3,56,000.00. The next fee is only charged on performance above this level, so this profit will not be charged again.
Every figure on this page is produced by the same calculation engine that runs on live portfolios — nothing here is illustrative prose typed by hand.
Your profit has two parts, and the fee covers both
Profit on holdings you have already sold. The money sits as cash in your portfolio, and you can leave it there or buy something else with it.
Profit on holdings you still own, measured at the current market price. You do not have to sell for this to count.
Your profit or loss is made up of two parts, and your performance fee is based on both. Realised profit is what you have already booked by selling a holding — that money sits as cash in your portfolio. Unrealised profit is the gain on holdings you still own, valued at the current market price. Your portfolio value includes both, so the fee is worked out on your total position, not only on what you have sold.
Selling a holding and buying something else with the proceeds does not change your portfolio value — you have simply swapped shares for cash, or cash for shares, at the same value. So booking a profit does not trigger a fee, and reinvesting it is not treated as a deposit. Only market movement, or you adding or taking out money, changes anything.
Portfolio values are recorded after the market closes (the Indian market trades 09:15 to 15:30 IST), using the day’s official closing prices. Both the realised and the unrealised parts of your profit are checked at that point, so your statement reflects settled prices rather than a quote that was still moving.
Worked through in Example 16 (profit not yet sold), Example 17 (booking it) and Example 18 (reinvesting it).
Two ways to pay the fee
You choose how the performance fee is settled. The amount charged is exactly the same either way — only the source of the money differs.
The fee is taken out of your portfolio. Your portfolio value falls by the fee, and your new High Water Mark is that reduced value. You pay nothing from your own pocket.
You are invoiced for the fee and pay it from outside the portfolio. Your portfolio is not reduced, so your new High Water Mark is your full portfolio value — the profit has been paid for, so it is never charged again.
The fee is exactly the same amount either way, and a single settlement leaves you in the identical net position. Over several periods the choice does make a small difference: paying separately leaves more money invested, which then grows.
When you take money out while ahead
If your portfolio is above the High Water Mark and you withdraw, the gain you are taking out is settled at that moment rather than waiting for quarter-end. This is called an interim performance crystallization. You are charged 20% of the share of the gain you are withdrawing, and the gain you leave invested is untouched until the quarter closes.
The effect is that timing makes no difference: withdrawing everything just before quarter-end pays exactly the same fee as letting the quarter close first. See Example 10 and Example 11.